Financial property rights under colonialism: Some counterfactual possibilities

This article seeks to explain the lack of the development of contemporaneously 'modern' money and credit markets in the 18th to 19th century economy of India. Borrowing from the literature on property rights, it demonstrates that the emergence of 'modern', and state-connected money markets was the result of a certain kind of power relationship between rulers and financial capital holders where the two were forced to mutually cooperate; financial systems represented the institutionalization of this mutual cooperation. Specific kinds of 'colonialism' represent just one special case of a relationship where the latter did not obtain. The article thus proposes a mechanism though which the spread of European capital could have retarded financial market formation in now-developing areas with otherwise considerable concentration of 'native' mercantile capital.